IMPROVE Act

Improving Manufacturing, Public Roads, and Opportunities for a Vibrant Economy
 

How does the IMPROVE Act affect taxpayers?
 

Tax Decreases

State Sales Tax on Food

The state sales tax on food was cut from five percent to four percent effective July 1, 2017. Read more here. 

Franchise and Excise Tax

For tax years beginning on or after January 1, 2017, a qualifying Tennessee manufacturer doing business both in-state and out-of-state may elect to apportion its net earnings and net worth to Tennessee based on a single sales factor.

In order to qualify for the single sales factor option, 50% of a taxpayer’s revenue from its activities in Tennessee must be from fabricating or processing tangible personal property for resale and consumption off the premises. Once made, the election will remain in effect for a minimum of five years.  Learn more here. 

Hall Income Tax

The IMPROVE Act includes a plan to phase out the Hall income tax over five years.  The applicable tax rate for each year is as follows:

  • 4%  for tax years beginning January 1, 2017
  • 3%  for tax years beginning January 1, 2018
  • 2% for tax years beginning January 1, 2019
  • 1% for tax years beginning January 1, 2020
  • Full repeal for tax years beginning January 1, 2021

Read more about the Hall income tax phase out here. 

 

Other Tax and Fee Changes

Vehicle Registration Fee

The cost to register a vehicle in Tennessee increased effective July 1, 2017.

  • The registration fee for passenger motor vehicles  increased by $5
  • The registration fee for commercial motor vehicles for transporting passengers for hire (buses, taxis) increased by $10
  • The registration fee for commercial and freight motor vehicles (semis, tractor trailers) increased by $20

Learn more here. 

Electric Vehicle Registration Fee

There is a $100 registration fee for electric vehicles effective July 1, 2017.  This fee is in addition to the standard registration fee.

Learn more here.

Gas Tax

The state’s tax on gasoline increased by six cents over the last three years.  Gasoline includes gasoline, ethanol, methanol, E-85, M-85 and A-55. The applicable tax rate for each year is as follows:

  • $0.20 per gallon until June 30, 2017
  • $0.24 per gallon from July 1, 2017 to June 30, 2018
  • $0.25 per gallon from July 1, 2018 to June 30, 2019
  • $0.26 per gallon beginning July 1, 2019

Local governments received a portion of the gas and diesel tax increases over the last three years to fund roads. For a breakdown of the additional amounts that were allocated to cities and counties for road funding, click here (for cities) and click here (for counties).

Diesel Tax

The state’s tax on diesel fuel increased by 10 cents over the last three years.  Diesel includes special diesel and biodiesel.

  • $0.17 per gallon until June 30, 2017
  • $0.21 per gallon from July 1, 2017 to June 30, 2018
  • $0.24 per gallon from July 1, 2018 to June 30, 2019
  • $0.27 per gallon beginning July 1, 2019

Local governments received a portion of the gas and diesel tax increases over the last three years to fund roads.For a breakdown of the additional amounts that were allocated to cities and counties for road funding, click here (for cities) and click here (for counties).

Learn more about these changes to the motor fuel tax rates here. 

Compressed Natural Gas and Liquified Gas

Compressed natural gas tax increased by eight cents over the last three years.

  • $0.13 per gallon until June 30, 2017
  • $0.16 per gallon from July 1, 2017 to June 30, 2018
  • $0.18 per gallon from July 1, 2018 to June 30, 2019
  • $0.21 per gallon beginning  July 1, 2019

Liquified gas tax increased by eight cents over the last three years.

  • $0.14 per gallon until June 30, 2017
  • $0.17 per gallon from July 1, 2017 to June 30, 2018
  • $0.19 per gallon from July 1, 2018 to June 30, 2019
  • $0.22 per gallon beginning July 1, 2019

Learn more here.